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प्रश्न
Explain the functions of a commercial bank.
State and explain the functions of commercial banks.
उत्तर
Commercial banks act as intermediaries in the country’s financial system by bringing savers and investors together. They are profit-seeking financial institutions. Commercial banks play an important role in mobilizing savings and allocating them to various economic sectors. It includes both scheduled commercial banks and non-scheduled commercial banks. Scheduled commercial banks are those included in the second schedule of the Reserve Bank of India Act of 1934. Based on ownership and function, Indian commercial banks can be classified into four categories: Public sector banks, Private sector banks, regional rural banks, and foreign banks.
The functions of Commercial Banks are as follows:
- Acceptance of deposits: Accepting deposits is one of the primary functions of commercial banks. Deposits constitute the main source of funds for these banks. Savings lead to the creation of deposits. The deposits are categorised as:
- Demand Deposits: These deposits are withdrawable on demand. They are in the form of current account and savings account deposits.
- Current accounts are usually opened by business people, corporations, industrial houses, trusts, etc. They are provided with an overdraft facility, i.e. they are allowed to withdraw more than the balance in the account.
- Savings accounts are operated mainly by the salaried class, small traders, etc., who wish to save a part of their income with the bank.
- Time deposits: These deposits are repayable after a certain period of time. In other words, they can be withdrawn only on maturity. They are in the form of Recurring deposits and Fixed deposits.
- Recurring deposit refers to a deposit wherein the customer deposits a fixed amount at regular intervals for a specified period of time.
- Fixed deposits refer to the lump sum amount deposited by a customer for a specified period of time. This deposit carries a high rate of interest compared to all other deposits.
- Demand Deposits: These deposits are withdrawable on demand. They are in the form of current account and savings account deposits.
- Providing loans and advances: Commercial banks mobilize savings and lend these funds to institutions and individuals for various purposes.
- Loans: Based on tenure, loans can be classified as call loans, short-term, medium-term, and long-term loans. The longer the duration, the greater the rate of interest will be.
- Advances: The banks also provide cash credit, overdraft facility, and discount bills of exchange.
- Ancillary functions: Commercial banks provide a range of ancillary services, such as:
- Transfer of funds
- Collection of money
- Making periodic payments on the customer’s behalf
- Merchant banking
- Foreign exchange
- Safe deposit lockers
- Demat facility
- Internet banking
- Mobile banking
- Credit creation: Credit creation is an important function of commercial banks. Commercial banks are the creators of credit. Demand and time deposits constitute the primary deposits of banks. After meeting reserve requirements, the balance amount is used for giving loans. Thus, secondary deposits, or derivate deposits, are created out of the loans provided by the banks.
Notes
Students can refer to the provided solutions based on their preferred marks.
APPEARS IN
संबंधित प्रश्न
Accepting deposits from the public is the................................. function of Commercial Bank.
(secondary / general / primary / incidental)
Explain different types of loans and advances provided by commercial banks.
Explain the components of Legal reserve Ratio.
The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is
called:( choose the correct alternative)
(a) Statutory liquidity ratio
(b) Deposit ratio
(c) Cash reserve ratio
(d) Legal reserve ratio
Explain the process of credit creation by commercial banks.
A bank is an institution which deals in money and _____________
(commodity money/credit/barter/standard money)
Explain the agency function of commercial banks.
Explain, with reason, whether you Agree or Disagree with the following statement.
Commercial banks provide many general utility services.
How do commercial banks create deposits? Explain.
State whether the following statement is true or false:
Central bank also performs commercial banking business.
Distinguish between the following :
Quantitative and Qualitative measures of credit control.
State whether the following statement is true or false.
The Cash Reserve Ratio does not affect the lending capacity of the commercial banks.
Write short note on :
Credit Creation.
Fill in the blank using proper alternatives given in the bracket:
.................consumption cannot be zero.
Fill in the blank using proper alternatives given in the bracket:
The primary function of commercial banks is to ...................
Write short Answer for the following question:
Explain various types of Bank Deposits ?
State whether the following statement is True or False with reason:
Commercial Banks cannot give interest on deposits.
Write explanatory note.
Primary functions of commercial bank.
State whether the following statements are TRUE or FALSE:
Commercial banks play an important role in economic development.
Give reasons or explain the following statement:
Every loan creates a deposit.
State whether the following statements are True or False with reasons :
The interest is more on savings deposits.
Define or Explain the concept
Current deposit
Fill in the blank with appropriate alternatives given below
Deposits from __________ account can be withdrawn without any notice.
Fill in the blank with appropriate alternatives given below
Facility of E-banking is provided through __________
State whether the following statement is True or False.
The saving bank deposit can be opened with a small amount.
State whether the following statement is True or False.
Credit money is created by the central bank of a country.
State whether the following statement is True or False.
There is no difference between primary deposit and secondary deposit of a commercial bank.
Define explain the following concept.
Cash credit
Define explain the following concept.
Safe deposit vault
Define explain the following concept.
Discounting of bills
Give reason or explain the following statement:
Overdraft facility is provided to current account holders.
Give reason or explain the following statement:
Rate of interest on fixed deposit is high.
Distinguish between:
Call loans and long term loans
Distinguish between:
Current account and saving account
Distinguish between:
Cash credit and overdraft facility
Write short note on:
D-mat account
Answer the following question:
Explain various types of deposits.
Answer the following question:
What are the different types of loans provided by commercial banks?
State with reason whether you agree or disagree with the following statement.
A commercial bank create credit on the basis of primary deposit.
State with reason whether you agree or disagree with the following statement.
Commercial banks perform many general utility services.
What are the primary functions of commercial banks?
State with reason whether you 'agree' or 'disagree' with the following statement.
Credit creation of commercial banks is based on primary deposits.
Answer the following question.
Explain the money creation function of commercial banks.
The Functions of commercial banks are broadly classified into ______.
Bank credit refers to ______.
What is credit creation?
Write the mechanism of credit creation by commercial banks.
Which of the following points indicates that RBI is controlling the commercial banks?
The process of money creation or credit creation is done by ______
Which of the following points states that the open market operation helps in controlling credit creation?
What is the effect of a rise in the rate of SLR on the creation of credit?
______ is the total liability of the monetary authority of the country.
Which of the following are the other functions of a commercial bank?
What role of RBI is known as 'lender of last resort'?
Which of the following are the agency functions of commercial banks?
M3 and M4 are known as ______ money.
Demand deposits include ______
Consider the following statements:
- M1 is a broad concept of money.
- M2 is a narrow concept of money.
- M3 includes both M1 and lime deposit of public with the bank.
Which of the following is true with respect to the concept of supply of money?
In the present COVID-19 situation, many economists have raised their concerns that the Indian economy may have to face a deflationary situation due to reduced economic activities in the country. Suppose you are a member of the high-powered committee constituted by the Reserve Bank of India (RBl). You have suggested that as the supervisor of commercial banks, ______ (restriction/release) of the money supply be ensured by the Reserve Bank of India (RBI).
Saving deposit in the Post office is a part of ______
In the case of Gross Domestic Capital Formation, which one will be the part of it?
Read the following hypothetical case study carefully and answer the questions follow on the basis of the same.
Agricultural Developmental Bank of Pakistan uses the production function approach for measuring bank outputs and costs. A translog cost function is estimated to provide an assessment of the bank's scale and scope efficiency, and to quantify the extent to which its production costs are sensitive to the size and output mix. Results show that the bank enjoys both overall and product-specific economies of scale and, therefore, there exists scope for the bank to expand its operations at a declining average cost. Even though bank branches in all size categories enjoy economies of scale, the extent of such economies is larger for branches operating at a smaller scale of production. This implies that as the bank branches grow larger in size in terms of both loan and deposit accounts, they move closer to attaining increasing returns to a factor. It is also shown that the marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger in size in terms of either the number of loans or the number of deposits. This confirms that branches operating at a larger scale of production have attained greater cost-efficiency in terms of servicing the loan and deposit accounts.
The increasing returns to scale in larger branches is due to ______
Identify the correctly matched pair of the items in Column A to that of Column B
| Column A | Column B | ||
| 1 | Money | (a) | Supply of Money |
| 2 | Commercial Bank | (b) | Store of Value |
| 3 | Central Bank | (c) | Credit Control |
| 4 | M4 | (d) | Circulation of Money |
M3 = ______
Which of the following statements is not true?
The Narrow concept of money includes ______
_________ is an institution that accept deposits for lending purposes.
